In a stunning display of strength, India’s manufacturing sector has achieved a remarkable feat, propelling the country’s economic growth to new heights. The S&P Global India Manufacturing Purchasing Managers’ Index (PMI) soared to a 31-month high of 58.7 in May, indicating a substantial improvement in the manufacturing landscape. This surge in the PMI was driven by an upsurge in demand for Indian products both domestically and internationally, coupled with overall enhancements in operating conditions.
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The latest PMI data comes hot on the heels of India’s GDP expanding at an impressive rate of 6.1 percent in the January-March 2024 quarter. This robust growth has catapulted the growth estimate for the full fiscal year 2022-23 to an impressive 7.2 percent. The manufacturing sector, too, demonstrated its resilience, registering a year-on-year growth of 4.5 percent in the fourth quarter of FY2023.
The seasonally adjusted PMI, rising from 57.2 in April to 58.7 in May, signifies the sector’s strongest upswing in health since October 2020. Notably, out of the five sub-components of the PMI, the stocks of purchases exhibited extraordinary strength, experiencing an unprecedented surge in May.
The PMI, compiled by S&P Global through responses from purchasing managers in a panel of around 400 manufacturers, offers valuable insights into the sector’s performance. A reading above 50 indicates expansion compared to the previous month, while a reading below 50 indicates contraction.
The remarkable surge in May’s Manufacturing PMI can be attributed to the exceptional strength in demand conditions. Indian companies witnessed a surge in new orders, with exports playing a pivotal role in driving growth. International sales expanded at the fastest pace in six months, underscoring the robust demand for Indian-made products in global markets.
The surge in factory orders has paved the way for heightened sales, leading to increased production, employment, and purchases. The survey further reveals a sharp and accelerated increase in quantities of purchases, marking the most robust rate of expansion in over 12 years.
Indian manufacturers, in response to the growing demand, have ramped up their production volumes. However, this surge in demand has exerted pressure on the capacity of goods producers. In a bid to meet market needs, companies have focused on job creation, resulting in a six-month high in employment growth. Moreover, as supply chain conditions improved, companies reported a record accumulation in input inventories.
The recent release of data by the National Statistical Office (NSO) corroborates the positive narrative. India’s GDP grew by 6.1 percent in the January-March 2024 quarter, primarily driven by robust growth in the services sector, including construction, trade, hotels, and transport. Increased investment further fueled the economy. However, private final consumption expenditure witnessed muted growth.
After two consecutive quarters of contraction, the manufacturing sector displayed its resilience, making a strong comeback in the fourth quarter of FY23 with a year-on-year growth of 4.5 percent. Notably, revisions to previous quarter figures have resulted in an upgraded manufacturing growth estimate of 1.3 percent for FY23, signaling a positive trajectory for the sector.
The impressive performance of India’s manufacturing sector, as reflected in the surging PMI, sets a promising stage for the country’s economic growth. The substantial increase in factory orders, driven by robust domestic and international demand, has not only fueled higher production, employment, and purchases but has also strengthened the economic foundations. This positive momentum enhances India’s position in the global market, fosters international partnerships, and generates a plethora of employment opportunities, setting the stage for sustained and robust economic expansion.
